Associations new law
The Associations Incorporation Act 2015 commenced 1 July 2016.
The Act provides a framework of regulation for not-for-profit organisations such as sport and recreation clubs, societies and community groups in Western Australia leaving the internal management of associations largely to the members. Associations are still able to incorporate as a separate legal body and thereby limit the liability of its members for lawful activities.
Key features of the new law
Associations must review and update their rules as well as introducing a number of changes regarding:
- financial reporting,
- the rules,
- becoming incorporated and
- membership of incorporated associations
A three–tiered system of financial reporting and accountability requirements based upon the associations revenue has been introduced.
- Tier 1 associations (revenue of less than $250,000) can elect to prepare basic financial statements with no independent review or audit.
- Tier 2 associations (revenue of $250,000 or more, but less than $1,000,000) must prepare financial reports that give a true and fair view of the financial position of the association in accordance with Australian Accounting Standards. Such reports must be reviewed by a member of a professional accounting body.
- Tier 3 associations (revenue of $1,000,000 or more) must prepare financial reports that give a true and fair view of the financial position of the association in accordance with Australian Accounting Standards. Such reports must be audited by a member of a professional accounting body holding a public practicing certificate.
Associations are still required to provide their financial reports to members; however the reports will not be required to also be provided to the Commissioner.
The Accounts and Auditing section of the INC Guide explains the requirements for each Tier in detail and will answer questions such as:
- What is revenue?
- What if an association’s revenue is higher than usual one financial year?
- When should an association’s accounts be reviewed or audited?
The obligations of committee members has been formalised, which already exist under other laws. These include:
- duty of care and diligence;
- duty to act in the best interests of the association and for a proper purpose; and
- duty not to misuse their position or information
Eligibility to be on the committee
Eligibility requirements are also set out, which prohibit persons from sitting on the management committee where they:
- are an undischarged bankrupt or whose affairs are under insolvency law,
- been convicted with an offence involving fraud or dishonesty punishable on conviction by 3 months or more imprisonment; and
- have been convicted of an offence in connection with the promotion, formation of management of a body corporate, including duties under the new law.
Where a person is prohibited because they have been convicted of an offence they cannot be a committee member for a period of five years from their conviction, except where the conviction resulted in imprisonment, in which case they cannot be a committee member for five years from their release from custody.
A disqualified person can request the Commissioner's approval to be appointed to the committee.
The conflict of interest provisions have been extended to include financial and non-financial interests, by requiring ‘material personal interests’ to also be disclosed. It is now a requirement that:
- the member with the interest leaves the meeting while the matter is discussed and voted on; and
- the nature and extent of the interest be disclosed at the association’s next general meeting.
Go to the Management Committee section of the INC Guide to find out:
- who can be on a management committee;
- when payments may be made to committee members;
- what committee members need to do when they leave the management committee.
The protection of privacy of association members has been improved. Access to the membership register continues to be restricted to association members but now the law also limits how the information may be used. Further, a member may provide a post office box or email address for contact instead of a residential address and
the rules of the association may require a member who wishes to copy the register of members to provide a statutory declaration setting out the purpose for which the application is made.
Go to the Record Keeping section of the INC Guide to find out:
- what records an association must maintain;
- the requirements around a member inspecting or copying the records of members;
- when an association needs to submit information to the Commissioner for Consumer Protection.
Importantly all associations are required to update their rules and either adopt the Model Rules, or adapt their own rules (provided the rules comply with the new law). Incorporated associations will have three years from 1 July 2016 to ensure their rules comply with the new law or adopt the new model rules.
More information is available on the Key Features of the New Model Rules.
The INC Guide also includes information about updating the rules for your association during the transition period.
Each association is required to include an internal dispute resolution process in its rules. Any unresolved disputes between members of an incorporated association, and incorporated associations and their members can be heard by the State Administrative Tribunal (SAT).
Go to the Grievances and Disputes section of the INC Guide for information about resolving disputes in your association.
Eligibility for incorporation
To be eligible for incorporation an association must have at least six (6) voting members at all times. Incorporated associations are still required to be 'not-for-profit' but it is now acceptable for an association to engage in trading activities provided that all of the profits from these activities are used to promote the objects and purposes of the association. Individual members must not profit or receive distributions from the activities. See Not-for-Profit more information.
New applications for incorporation
The previous requirement for an association to advertise its intention to apply for incorporation up to three months before making the application has been removed. An application can now be submitted as soon as the association has developed its rules.
Go to the Becoming an incorporated association section of the INC Guide for more information.
A procedure for the amalgamation of two or more associations into a new incorporated association has been provided under the new law.
Go to Amalgamating existing incorporated associations in the INC Guide.
Winding up - ending an association
Associations can now choose either a winding up, which is a formal process using a liquidator, or a cancellation of incorporation, which is a simpler process without the need of a liquidator.
When an association winds up its affairs the surplus property may now be distributed to any of the following:
- An incorporated association.
- A company limited by guarantee (registered under the Corporations Act 2001).
- An organisation that holds a licence under the Charitable Collections Act 1947.
- A body corporate who was a member of the association (provided that it has a not for profit clause).
- A non-distributing co-operative registered under the Co-Operatives Act 2009.
The processes for ending the incorporation of an association are explained in greater detail in End of the Road section in the INC Guide.
Each association is required to give the Commissioner details of its address, and also notify the Commissioner of a change of address within 28 days of it occurring.
Addresses can be updated using AssociationsOnline.
Government's Regulatory Impact Assessment Requirements
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Non-incorporated groups, individuals and stakeholders can also be alerted about the new law by subscribing to the AssociationsInfo newsletter.
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